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Evaluating the Effectiveness of Asset Pricing Model before, during and after Financial Crisis 2008: Evidence from Karachi Stock Exchange

Author

Listed:
  • Waqar-ul-Hassan
  • Zeeshan Hasnain
  • Shahbaz Hussain

Abstract

The Study aims to explore the strength of arbitrage pricing model (APT) for determining stock returns of Karachi stock exchange (KSE) across three distinct and structured periods; before financial crisis period (2006-07), during financial crisis period (2008) and after financial crisis period (2009-10). The Study adopted descriptive statistics, Pearson correlation, linear regression, Random effect model for interpretation and execution of data. 253 financial and non-financial listed companies on KSE for the period of (2006-10) are considered as sample firms. Results of regression analysis indicated that models selected for the present study showed poor performance for measuring KSE returns. Independent variables showed significant behavior for measuring KSE returns in pre-financial crisis period; no statistical relationship for measuring KSE returns in during financial crisis period; insignificant nature for measuring KSE returns the post-financial crisis period. The Study has provided understandings about arbitrage theory applicability and financial crisis - 2008 impacts on KSE.

Suggested Citation

  • Waqar-ul-Hassan & Zeeshan Hasnain & Shahbaz Hussain, 2017. "Evaluating the Effectiveness of Asset Pricing Model before, during and after Financial Crisis 2008: Evidence from Karachi Stock Exchange," Business and Economic Research, Macrothink Institute, vol. 7(1), pages 177-188, June.
    • Handle: RePEc:mth:ber888:v:7:y:2017:i:1:p:177-188
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Arbitrage pricing theory; Stock market; Financial crisis - 2008; Economic conditions and Panel analysis techniques;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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